Nexa Resources Earnings Call Highlights Mining Strength

Nexa Resources ((NEXA)) has held its Q4 earnings call. Read on for the main highlights of the call.

Nexa Resources’ latest earnings call struck a cautiously upbeat tone, highlighting strong quarterly and full‑year operating results and healthier leverage, while openly acknowledging pressure in the smelting business, negative full‑year free cash flow, and lingering regulatory and political risks.

Q4 Results Deliver Strong Top-Line and Margin Upside

Nexa reported Q4 net revenues of $903 million, up 18% sequentially and 22% year‑over‑year, with adjusted EBITDA of $300 million, implying a robust 33% margin. Net income reached $81 million, or $0.38 per share, and the company generated $51 million in free cash flow during the quarter.

Full-Year Performance Shows Resilience Despite Headwinds

For the full year, Nexa delivered $3.0 billion in net revenues, a 9% increase versus 2024, and adjusted EBITDA of $772 million, up 8%, for a solid 26% consolidated margin. Net income totaled $223 million, or $1.00 per share, underscoring resilient profitability despite softer smelting conditions and cash flow drag.

Mining Segment Anchors Earnings with High Margins

Mining operations remained the backbone of the business, with Q4 zinc production hitting 91,000 tons, up 9% versus Q3, and full‑year production of 316,000 tons in line with guidance. The mining segment posted Q4 net revenues of $532 million and adjusted EBITDA of $266 million, a hefty 50% margin, while full‑year mining EBITDA was about $658 million with a 42% margin.

Aripuanã Ramp-Up Emerges as a Key Catalyst

Aripuanã achieved its highest quarterly production to date, signaling steady progress in the ramp‑up phase and strengthening Nexa’s medium‑term growth story. Installation of the fourth tailings filter is moving on schedule, with commissioning planned for the first half of 2026 and full capacity expected in the second half, supporting higher production and future cash generation.

Exploration Results Point to Resource Upside

Exploration in 2025 delivered deep, high‑grade intersections across core assets including Cerro Lindo, Aripuanã’s Massaranduba, Vazante, and Pasco, reinforcing the company’s resource base. Management emphasized that these results support potential life‑of‑mine extensions, which could underpin longer‑term production and value.

Balance Sheet Strengthens as Leverage Comes Down

Nexa continued to improve its capital structure, reducing net debt by $96 million over the year and bringing net leverage down to 1.7x from 2.2x in the prior quarter. Total liquidity stood at $842 million, including a $320 million undrawn sustainability‑linked revolving credit facility, while average debt maturity extended to 7.6 years at a 6.49% cost of debt.

Growing Silver Exposure to Lift Future Earnings

The company produces around 11 million ounces of silver annually and highlighted a major upcoming shift in its Cerro Lindo streaming agreement. From the second quarter of 2026, the stream will step down from 65% to 25%, materially increasing Nexa’s direct exposure to silver prices and enhancing expected EBITDA leverage if silver remains strong.

CapEx Discipline Supports Projects Without Overstretching

Full‑year capital expenditures reached $352 million, slightly above the $347 million guidance due largely to foreign‑exchange effects, signaling tight cost control. The company invested $42 million in Cerro Pasco Phase 1 in 2025 versus a $44 million plan, while exploration and project evaluation spending came in at $78 million, below the original $88 million budget.

Smelting Segment Remains a Drag on Profitability

The smelting division showed clear weakness, with Q4 metal sales falling to 142,000 tons due to lower Brazilian smelter output and softer zinc oxide demand. Adjusted EBITDA from smelting was only $34 million in Q4 and $113 million for the year, translating into a thin 6% margin and underscoring a key area of pressure for Nexa.

Full-Year Free Cash Flow Negative on Capital Allocation Choices

Despite healthy operating cash generation, Nexa posted negative full‑year free cash flow of $105 million, largely due to deliberate debt repayments and $48 million returned via dividends and share premium reimbursements. The company noted that cash flow before loan repayments, debt payments, and dividends was positive at $39 million, highlighting the impact of capital allocation decisions.

Working Capital and Other Items Weigh on Cash Conversion

Working capital and other cash flow movements had a negative $212 million impact during 2025, reducing near‑term cash conversion even as operating cash flow before working capital reached a strong $846 million. Management acknowledged this drag but framed it as a timing issue rather than a structural weakness in the business.

Smelting Costs and FX Movements Squeeze Margins

Smelting cash costs climbed to $1.41 per pound in Q4 and averaged $1.28 per pound for the year, with conversion cost at $0.34 per pound in the quarter. The company attributed the year‑over‑year increase mainly to higher operational costs and unfavorable foreign‑exchange shifts at its Brazilian units, which further pressured already thin smelter margins.

Ramp-Up Costs and Seasonal Weather Risks Persist

Cost per ton of run‑of‑mine material rose sequentially to $56 in Q4, driven primarily by higher operating costs at Aripuanã during the ramp‑up phase. Management also reminded investors of historical rainy‑season effects and said it is managing throughput carefully to mitigate seasonal risks, but acknowledged these remain a potential source of volatility.

Regulatory Setbacks and Political Noise in Peru

Nexa flagged regulatory uncertainty at Ayawilca after the disapproval of its environmental impact study, noting that it is engaging with authorities to address concerns. Short‑term political turbulence in Peru, with leadership changes and elections, was characterized as “noise,” with management seeing limited immediate operational impact but recognizing it as a background risk.

Silver Upside Strategy Prioritizes Balance Sheet over Streaming

While silver prices are favorable and investor interest in streaming deals is high, management signaled that new silver streaming transactions are not a near‑term priority. This stance means Nexa is choosing not to pursue quick monetization of silver upside to accelerate deleveraging, preferring to keep future earnings leverage to metal prices.

Guidance and Outlook Center on Execution and Balance Sheet

Management confirmed that 2025 guidance was met on both mining and smelting volumes, with 316,000 tons of zinc mined and 567,000 tons of smelter sales, and reiterated its focus on deleveraging and liquidity preservation. Looking ahead, key milestones include commissioning Aripuanã’s fourth tailings filter in H1 2026, reaching full plant capacity in H2, advancing Cerro Pasco Phase 1 with similar 2026 CapEx, sustaining exploration, and benefiting from a supportive zinc market and the 2026 Cerro Lindo silver stream step‑down.

Nexa’s earnings call painted the picture of a miner leaning on high‑margin mining assets and disciplined project execution to offset smelting weakness and short‑term cash flow pressure. With a stronger balance sheet, clear growth catalysts in Aripuanã and silver exposure, and a candid view of risks, the company is positioning itself as a leveraged play on zinc and silver prices heading into 2026.